Knight Frank – The PCL sales market is gaining momentum as…
Global property firm Knight Frank has revealed that the deal pipeline in key London residential markets grew further in July as supply continued its catch-up game against demand.
The agency reports that the number of offers accepted across London last month was the highest figure in 10 years, underlining the current strength of appetite for higher value properties in the capital.
Knight Frank says a combination of factors has led to the pipeline being stronger than it was during the final months of the stamp duty holiday in 2021. This includes the resumption of international travel, with the number of international arrivals at Heathrow in June just 17% below the same month in 2019. This compares favorably to an equivalent drop of 87% last June, when the UK and the world were just coming out of lockdown.
A second factor, says Knight Frank, is that major London markets offer relatively good value as shoppers continue to re-examine how and where they live after Covid.
While there was a lot of focus on the country’s breakout trend during the early days of the pandemic, price growth in London has remained lackluster even after six subdued years.
In fact, according to Knight Frank, average prices in central London are still 15% lower than their previous peak of seven years ago.
Third, according to the company, there is a creeping sense that investors are looking more closely at safe-haven assets – which has traditionally benefited London’s prime property market, which is seen as a safe haven globally.
This year so far has seen investor nervousness clearly on display as central banks around the world attempt to avoid stagflation.
After sharp falls this year due to the strengthening of the US dollar, the price of gold has risen slightly since mid-July amid geopolitical tensions, and real estate continues to be considered an asset class more profitable and more stable than others.
“There are market risks on the horizon, but they’re not on the horizon yet,” said Tom Bill, head of UK residential research at Knight Frank.
“The first is the changing rate environment, which means that mortgages have become significantly more expensive since last September’s low point. However, the impact has yet to have a significant impact on UK property markets, with mortgage offers remaining valid for six months and most people on fixed rate mortgages.
He added: “Rising mortgage rates are one of the reasons prime pricing has slowed in global markets. However, major London markets are also likely to be better protected against rising borrowing costs than other UK locations due to higher levels of wealth. This fact is underscored by the current strength of higher value markets. While average price growth in PCL was 2.8% in the year to July and 5.2% in the London periphery, performance was stronger at the higher price ranges. »
Bill concluded: ‘The other unknown is the identity of the new Prime Minister in September, although a new UK government that will effectively be in pre-election mode is unlikely to pose a short-term risk to the market.’